2. Bills and Collections - An Overview
2.1 Introduction
A bill, as an instrument of international trade, is the most commonly
used method for a seller to be paid through banking channels. Besides
credit risk considerations, bills are the customary business practice
for trade and a particularly important fee-earning service for any bank.
The Bills and Collections (BC) module supports the processing of all
types of bills, both domestic and international. It handles the necessary
activities during the entire lifecycle of a bill once it is booked.
In an effort to empower your bank in handling a high volume of credit
and to enable you to provide superior services to the customers of your
bank, Oracle FLEXCUBE provides you with the following features:
- The Bills and Collections module supports the processing of all types
of international and domestic bills like:
- Incoming Bills under LCs
- Incoming Bills not under LCs
- Outgoing Bills under LCs
- Outgoing Bills not under LCs
- Incoming Collections
- Outgoing Collections
- Usance or Sight Bills
- Documentary or Clean Bills
- You can create a new product or copy the details of an existing bill
on to a new one and modify it to suit your requirements. This renders
the input of the details of a bill faster and easier.
- You have the flexibility to create and customize a product to suit
almost any requirement under a bill. The bills associated with the product
will bear characteristics that you define for it.
- The BC module is designed to handle the interest, charges, or fees
related to a bill and record amendments to the original terms of the
bill.
- The BC module actively interacts with the LC module of Oracle FLEXCUBE.
This enables easy retrieval of information for bills drawn under an LC
that was issued at your bank. Most of the details maintained for the
LC will be defaulted to the bill when you indicate the reference number
of the LC involved in the bill. This eliminates the need to re-enter
the details of the LC all over again.
- The Central Liability sub-system automatically controls the booking
of a bill against the credit lines assigned to the customer before the
bookings are made. Oracle FLEXCUBE also supports tracking your bank’s
exposure for a bill to several parties.
- You have the option to automate periodic processes such as:
- The application of floating interest rates to the components of a
bill as and when they change
- The movement of a bill from a given status to another
- Accrual of interest due to a bill
- Liquidation of bills on the liquidation date that you indicate
- Generation of tracers on the due date
These will be processed as part of the batch processes run at BOD
or EOD. The system automatically calculates the date on which the events
should take place, based on the frequency and the date specified for
the bill.
- The module also supports automated follow-up and tracer facility
for payments and acceptance. Tracers can be automatically generated at
an indicated frequency until a discrepancy is resolved.
- When a repayment against the bill, is not made on the due date, you
may want to do an aging analysis for the bill. You can define the number
of days that the bill should remain in a given status, the sequence in
which a bill should move from one status to another and also indicate
the direction of movement (forward or reverse). You can follow-up on
the repayment of a bill by generating reports which detail the status
of aging bills.
- Depending on the processing requirements of your bank, you can define
and store the standard documents, clauses, and instructions and free
format texts. These details can be incorporated and printed onto the
output document of the bill, by entering the relevant code. This eliminates
entering the details of standard components of a bill every time you
need to use them.
- Bills can be carried over several stages during the day. After a
bill has been entered, it can be verified and authorized on-line before
further processing.
- Information services for managerial and statistical reporting such
as on-line transactions, status report and the immediate retrieval of
information of the bills processed at your bank can be generated.
- Oracle FLEXCUBE’s Graphic User Interface (GUI) facilitates
ease of input. Option lists are provided wherever possible. This makes
the module both efficient and easy to use.
- The media supported include Mail, Telex and SWIFT.
- The BC module supports and handles the following functions:
- Open/Amend a bill
- The authorization of bill contracts
- The reversal and liquidation of interest and charges
- Customer inquiries
- The generation of tracers and advices
- The generation and printing of reports
- On-line help - indicates that you can invoke global help by making
use of the Help option in the Menu bar. You can also invoke on-line context
sensitive help, which is made available to you, if you strike the hot
key <F1> while in the application. A window pops up displaying
information associated with the field from which you invoked it.
This chapter contains the following sections:
2.2 Operations on a Bill
The operations that you can perform on a bill depend on the trade
finance product type you are processing. Further, the messages and advices
that are generated for the bill are determined by the operation you perform
on the bill. The interest, charges or fees can be different for each
operation that you perform on the bill.
In Oracle FLEXCUBE, all types of bills are classified in to two categories.
They are:
- Import Bills
- Export Bills
All types of incoming bills (international and domestic) financed
by your bank are termed Import bills. Similarly, all outgoing bills (international
and domestic) financed by your bank are termed Export bills.
The operations that you can perform on a bill have been diagrammatically
represented below:
The system allows you to
effect a change of operation for the following operation types:
- Acceptance to Advance (automatic facility provided)
- Acceptance to Discount
- Collection to Purchase
For instance, while processing an acceptance bill, which needs to
be discounted, you need not enter a new bill to discount the bill. You
need to just amend the operation type from acceptance to discount.
SWIFT Messages for an Import Bill
The messages that are generated for an Import bill depend on the operation
you perform on the bill. The following are the SWIFT messages that are
supported for an Import bill.
Description
|
SWIFT code
|
Acknowledgement
|
MT410
|
Acceptance Advice
|
MT412
|
Payment tracer
|
MT420
|
Acceptance tracer
|
MT420
|
Advice of Payment for a
Collection bill
|
MT400
|
Advice of fate (principal
and acceptance)
|
MT422
|
Refusal Advice (payment
and accept)
|
MT734
|
Discharge Advice
|
MT732
|
Tracers that are generated
|
MT420
|
Authorization to pay, accept
or negotiate
|
MT752
|
Advice of Payment for import
bills under LC
|
MT756
|
SWIFT Messages for an Export Bill
The messages that are generated for an Export bill depend on the operation
you perform on the bill. The following are the SWIFT messages that are
supported for an Export bill.
Description
|
SWIFT Code
|
Acknowledgement
|
MT410
|
Acceptance Advice
|
MT412
|
Payment tracer
|
MT420
|
Acceptance tracer
|
MT420
|
Refusal Advice (payment
and accept)
|
MT734
|
Discharge Advice
|
MT 732
|
Amendment of instruction
|
MT 430
|
Reimbursement claim
|
MT 742
|
Discrepancy Requirement
|
MT 750
|
Tracers that are generated
|
MT 420
|
2.3 Interest and Charge Liquidation
The BC module has a flexible mechanism for raising, tracking and controlling
the interest that you collect and the charges that you levy. These may
be on a cash or account receivable basis. They can be collected either
in advance or in arrears and can be accrued or non- accrued.
Interest can be collected either as a rate or as a flat amount. Standard
Interest rates can be defined for each bill type.
Changes that you effect to fields like the base date, exchange rate
or account numbers require reversal entries The system generates reversal
entries for the corrected amount, account, rate etc.